US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising

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1 US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising WHITE PAPER Prepared by Nick Lane Chief Analyst, mobilesquared

2 Mobile is fast becoming a central part of brand communications throughout Asia, where cellphones have achieved penetration rates that rival TV. Much of the current activity is simple, direct advertising, but the explosive growth rates of mobile-friendly social channels like Twitter are already influencing the way brands harness these devices ubiquity. We expect mobile-oriented activities to become a cornerstone of the marketing mix across the region within the next months. Simon Kemp Engagement Planner, BBH Asia Pacific 2

3 Summary Mobile advertising will generate 4% of total advertising revenues across Asia Pacific by the end of 2011, according to the latest research released by mobilesquared and published by Smaato. Mobile advertising across the region is coming of age. While the focus during 2010 was on the undoubted opportunity presented by hundreds of millions of mobile internet users across Asia, 2011 will be a period of starting the monetising process of that opportunity. Research reveals brands starting to invest more in mobile advertising campaigns resulting in a county-by-country increase in spend of between 32% and 122%. It s a period when the sleeping giant that is China wakes up and starts eating into Japan s dominance on the Asian mobile advertising market. up to 122% Brands investment increase in mobile advertising campaigns 17% China s contribute of total mobile advertising spend across Asia By the end of 2011, China will contribute almost 17% of total mobile advertising spend across Asia and mobilesquared projects incredibly strong growth for China over the coming five years, by which point it will join Japan and the US as a billion dollar market. But as the investment in mobile increases, it cannot be attributed to networks or smart devices. It is safe to say that Asia remains oblivious of the Apple effect. Yet again, 2011 will continue to be a year of lacklustre 3G rollouts, and slow smartphone adoption. Amid such ambivalence the rise of mobile social networking across Asia, allied to the fact it does not need high-end devices or high-speed networks, will provide an ideal platform to connect consumers and brands, and pave the way for a richer experience when technology and device capability permit. For the time being, less than 5% of all available inventory across Asia will be monetised via mobile advertising in 2011, while one theory suggests that mobile ad networks are playing catch up with the market, an alternative view is that it presents mobile ad network providers, like Smaato, with a phenomenal opportunity. The Powerhouse now packs a punch. Nick Lane Chief Analyst, mobilesquared 3

4 Size Matters Brands are now starting to move their spend onto mobile because across Asia the medium delivers scale. By the end of 2011 there will be billion mobile internet users across Asia. That means over the last 18 months, the number of mobile internet users across Asia has increased 22%. As a standalone figure it comes across as reasonably impressive. When placed in context, the growth represents million people, and that is impressive. Put another way, the potential audience to view display advertising on their mobile has increased by the equivalent of Japan, making advertising on mobile all the more compelling. 672 Billion Mobile internet users across Asia in Million China s mobile internet users by end of 2011 The mobile internet landscape is dominated by China. Not particularly surprising given that the number of mobile internet users by the end of 2011, according to mobilesquared, will be million, comparable to the total population of the US and Germany combined. China accounted for around two-thirds of mobile internet user growth added around 80 million mobile internet users in 2010, and mobilesquared forecasts a slight increase in growth of 86 million in Total Mobile Internet Users 2011, Asia (in Millions) Australia China Hong Kong India Indonesia South Korea Japan Malaysia New Zealand Philippines Singapore Thailand Taiwan Vietnam Others 0 66 Source: mobilesquared After China, the biggest growth will come from India, which will enjoy an increase in mobile internet users of 144%, from million in 2010 to 31.2 million by the end of Otherwise, growth remains steady across South East Asia in particular, while growth in Asia s two developed mobile markets, Japan and South Korea, appears to be stabilizing. 4

5 The number of mobile internet users in Japan is hovering a little under 100 million, while South Korea is in the mid-30 million. Not only does China have the largest number of mobile internet users, it has some of the most active. 476 Billion China s monthly page impressions in 2011 The average page impression per user per day in China is 39.23, compared to Australia (32.74), South Korea (33) and emerging mobile internet markets like Thailand (17.95) and India (14). But only when considering the number of people browsing, does the true potential of the mobile internet for brands in China come to the fore. On a daily basis across China in 2011 some billion page impressions are generated, or 476 billion a month, and 5.7 trillion per year. In China alone, this is creating an unparalleled opportunity for mobile advertising. Out of the total monthly page impressions, mobilesquared estimates that 4% are monetised through display advertising. This highlights the true extent of the opportunity in China for mobile ad networks in particular, and also, that the level of potential inventory being generated on a daily basis is on a scale unique to China. Average Daily Page Imperssions Per User Australia China India South Korea Thailand 6 0 Source: mobilesquared It is a similar story across Asia, beyond Japan and South Korea, where growth relative to the size of the country is on an unprecedented scale, and it is the growth in mobile internet consumption that is at the heart of the mobile advertising revenue spend across the region. 5

6 Mobile Ad Spend: The Sleeping Giant Awakes The Asian mobile advertising market will be worth US$2.8 billion by the end of 2011, representing an increase of 32% on 2010 spend. As in 2010, spend in Japan dominates Asia s mobile advertising revenue skyline projected by mobilesquared to remain the world s biggest mobile advertising market worth $1.71 billion this year but its dominance within the region is diminishing. Last year, mobile advertising revenues from Japan accounted for 70% of total spend across Asia, but that figure will drop to 61.1% in 2011 because of the rise of the sleeping giant, China. $2.8 Billion Asian mobile advertising market value by end of 2011 $1.71 Billion Japan s mobile advertising market value by end of 2011 Mobile advertising revenues in China will grow 121% in 2011, from $214.4 million to $474.7 million, accounting for 16.93% of spend in Asia. During 2011, China will replace South Korea as the second largest mobile advertising market in Asia, and will become the third largest in the world, behind the US in second place. $475 Million China s mobile advertising revenue by end of 2011 Within five years, mobilesquared forecasts China becoming the third nation, after Japan and the US, to become a billion dollar mobile advertising market. Mobile Advertising Spend Asia, Selected Markets (in Millions) Japan China South Korea India Thailand Australia Indonesia Malaysia Source: mobilesquared After China, India will experience the second largest increase in mobile advertising spend, up 83% from $24.6 million in 2010 to $45.1 million. Previously the market had been dominated by publishers dealing direct with advertisers, but over the last months, some of the more recognizable mobile advertising network providers are starting to penetrate this strange-hold on the display marketplace and fill sizeable inventory. Like China, India has unprecedented scale, but as a market it is developing considerably slower. Nevertheless, as mobile internet penetration increases, the opportunity for brands to connect with consumers, will more than double throughout

7 Similarly, mobile advertising spend across South East Asia and Australia is projected to increase by between 30-47% in The increase in spend is the result of heightened interest from brands across the region, utilizing the mass market appeal of the mobile internet. Interestingly, the research indicates that this has enabled the mobile ad networks delivering display-base campaigns, to maintain a consistent CPC and CPM rate to that of mobilesquared believes this is the result of the phenomenal traffic levels generating an abundance of inventory, creating a land-grab by the mobile ad networks. Put simply, there really is enough to go round, negating the need for mobile ad networks to compete on a head-to-head and develop a price war in the near-term. Mobile advertising will be worth 4% of total ad spend in Asia by the end of Even more notable is the fact this is at a time of strong growth in overall ad spend across the region. According to a 2010 report by emarketer and Starcom MediaVest Group, Asia Pacific will overtake North America as the largest advertising market in 2015, worth $173.2 billion. 47% 2011 SE Asia and Australia mobile advertising spend increase 4% Mobile advertising worth of total ad spend in Asia by end of 2011 $173 Billion Asia Pacific advertising market value by 2015 The report claims that the global economic slowdown prompted ad dollars to be reallocated to digital media in the emerging markets of Brazil, China and India. One year on after the report s release, the shift in ad spend is now filtering down onto the mobile platform. mobilesquared forecasts mobile advertising spend in Asia will accelerate from 2012, down to the proliferation of smartphones and the widespread deployment of high speed networks. Consequently, this will lead to more brands increasing their investment in mobile campaigns, to deliver a more creative, rich-media experience. Where Australia and South Korea are set apart from the rest of Asia, is that smartphone penetration as of the end of 2011 will be 39% and 38%, respectively. Indeed, South Korea is now undergoing something of a meteoric growth spurt in smartphone adoption. As of 2009, South Korea s smartphone market was largely nonexistent, but significant growth throughout 2011, is expected to result in the sale of approximately 17.5 million smartphones. Beyond Australia and South Korea, smartphone penetration remains low. In China, smartphone penetration has just reached double percentage points, while across much of South East Asia, the number is low single digit at best. Featurephones and legacy devices remain the dominant form factor. Across Europe and the US, the mobile advertising markets are exploding into life because of the rapid adoption of the smartphone. Not only is this increasing phenomenal in-app inventory, but browsing continues to be greater than featurephone users by a factor five, or by a factor 10 in the case of iphone users. 7

8 Limited smartphone penetration coupled with the continued sluggish rollout of 3G networks across South East Asia and India in particular, significantly dampens the scope of creativity restricted to lo-media campaigns. This is by no means a negative development, as lo-media equates to the potential for a higher frequency of repeat campaigns. Not surprising then, is the fact that display and messaging based mobile advertising will contribute the greatest percentage of spend in the majority of Asian markets in the foreseeable future App market will evolve from niche to established business model Furthermore, the lack of smartphones will not impact on the exponential increase of social media on mobile across the region. Despite slow starts, both Facebook and Twitter are making giant inroads across all markets, except China where local social networking sites, such as QQ and Qzone, and the country s own version of Twitter called Weibo. Harnessing the power of mobile social media in the coming months will prove an invaluable learning curve for brands seeking to capitalise on the advertising opportunities presented by the limitations of the small screen. And with social network sites becoming the second most visited sites across Asia (see below) among users (not including actual usage and page impressions generated), understanding how brands can integrate their content in an unobtrusive manner onto social media pages served to mobile devices will be critical as social networking starts to dominate traffic. Mobile Internet Browsing Behaviour, Asia, 2011 (in Millions) 1, Total News/Sport Mapping/Directions Search for Devices Search for Products Access Social Network Sites Source: mobilesquared The lack of smartphones across Asia will also accelerate mobile advertising spend in 2012 because of the pent-up demand for apps, from brands witnessing the impact app development and in-app advertising is generating in developed mobile markets. A much improved smartphone penetration across much of Asia in 2012 will evolve app marketing from a largely niche play in 2011 to an established business model. 8

9 Conclusion The sheer scale of the Asian mobile internet community is now starting to attract the attention of the brands, which are starting to increase their investment in mobile advertising. Within five years, Asia will not only be the biggest advertising region globally, it will have two of the biggest individual mobile advertising markets in the world is going to be very good, but 2012 will be better The inflection point will be 2012 when the need for brands to start delivering rich-media campaigns will drive spend in mobile advertising. The platform for this growth is being made possible despite the low smartphone penetration and lack of significant high-speed networks. Overcoming the immediate need for these components is the rise of mobile social networking, which is now starting to enjoy a ubiquity like SMS, though by no means on the same scale. Mobile social networking is assisting the development of the mobile advertising industry in Asia because, not only is it generating significant inventory, it also allows brands to sidestep the need for smartphones and 3G, and adopt a lo-media campaign strategy to develop a relationship with the consumer. In essence, mobilesquared believes 2011 is a stepping stone to 2012 when interest in mobile will reach an inflection point and brands will start investing sizeable sums into mobile advertising: 2011 is going to be very good, but 2012 will be better. 9

10 Advertisers are clearly excited about in-app marketing, and indeed have embraced app development itself as an area where they can build value and engage consumers directly. And while some advertisers are content with the relatively limited audience they can reach through phones capable of receiving these types of messages, many advertisers are disappointed by what options are available for them to reach Asia s vast majority of consumers who do not yet have these level of phones, nor can afford the data services associated with them. I think this is just today s problem. The future is incredibly bright for mobile advertising in the region as it will be one of the leading areas in the world where consumers use a mobile device as their first and only tool to access the Internet. Jason Kuperman Vice President, Omnicom Digital, Omnicom Group Asia Pacific 10

11 Nick Lane, Chief Analyst, mobilesquared Nick has been described as the leading commentator on UK mobile media (Adam Smith, Futures Director at GroupM). But Nick s experience extends well beyond the UK. He specializes in mobile market intelligence and heads up the research and analysis at mobilesquared ( Prior to launching mobilesquared, Nick was Head of Research Services and Principal Analyst at Informa, where he oversaw the group s leading industry newsletters, reports and forecasts that have helped shape the mobile industry. In this role, Nick established himself as one of the leading authorities on the mobile content, services and advertising space, regularly speaking and chairing at conferences and events around the world. While in this role at Informa, Nick wrote a number of reports, from consumer behavioral analaysis to mobile advertising. About mobilesquared mobilesquared provides specialist research which enables brands, agencies and the mobile industry to increase engagement with the mobile consumer. We conduct primary research on the mobile industry and mobile consumers, with a focus on delivering exclusive forward-looking data on mobile device usage, mobile web, app and commerce trends and usage, and mobile advertising responsiveness to help clients identify and respond to fast-changing mobile trends. And for a wider view of the industry, we provide detailed mobile industry user and revenue forecasts. nick@mobilesquared.co.uk Our clients look to mobilesquared s expertise to provide candid insight into the mobile market. We do this using our extensive global network of senior contacts to research, collect and collate the latest data, developments, trends and insight on an ongoing basis. mobilesquared is a trading name of D2 Mobile Ltd. All rights reserved. Whilst reasonable efforts have been made to ensure that the information and content of this report was correct as at the date of first publication, neither D2 Mobile Ltd nor any person engaged or employed by D2 Mobile Ltd accepts any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as no liability can be accepted in this regard. Readers assume full responsibility and risk accordingly for their use of such information and content. 11

12 About Smaato Smaato provides Ads for Apps operating the leading mobile advertising optimization platform called SOMA. More than 30,000 app developers and premium publishers have signed up with Smaato to monetize their content in 220+ countries and to manage 70+ billion ad requests per month. The Smaato network reaches 150+ million mobile unique users every month. SOMA s unique feature is the aggregation of 60+ leading ad networks globally to maximize mobile advertising revenues. Through an open API and the widest range of SDKs, SOMA can be easily integrated with ad networks, ad inventory owners (publishers, developers and operators) and 3rd party ad technology providers. Smaato is an active member of the Mobile Marketing Association, Singapore Infocomm Industry (SITF) and Singapore IT Federation. Smaato recently received the OnMobile Top 100 by AlwaysOn Media (2011, 2009 & 2007). Smaato was named a company to watch in 2010 by Financial Analyst company GP Bullhound, among other awards. Smaato Inc. is based in Redwood Shores, California. The privately held company was founded in 2005 by an experienced International management team. The European headquarters are in Hamburg, Germany and the Asia-Pacific presence of Smaato has been established in Singapore. 3 Lagoon Drive, Suite 170 Redwood Shores, CA T: +1 (650) F: +1 (650) americas@smaato.com Gerhofstrasse Hamburg, Germany T: F: emea@smaato.com smaato.com/blog metrics.smaato.com 66B, Tras Street Singapore T: F: apac@smaato.com twitter.com/smaato facebook.com/smaato Smaato White Papers info@smaato.com The names of actual companies and products mentioned here may be trademarks of their respective owners.